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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency once the election concludes. President Javier Milei has placed a limit on the currency to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for contributing to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Solely massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.