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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting concludes. The president has imposed a cap on the peso to tame soaring price increases and currently it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring price rises in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning reckless spending, he recently dropped a pledge for large tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.