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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country long used to holding the US dollar.

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

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. The president has imposed a limit on the currency to control soaring inflation and now it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back command of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner 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.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to control price rises in check. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Solely large-scale financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for 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 of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as planning to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

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

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.