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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the currency to control soaring inflation and now it is artificially high and reserves are depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader has so far committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.