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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

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

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency once the voting concludes. The president has imposed a limit on the currency to tame soaring inflation and currently it is overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to bring price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders than in similar economies under conventional leadership.

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

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.