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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting concludes. The president has imposed a limit on the peso to tame triple-digit inflation and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing muscular policies to reclaim command of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Solely massive economic support from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise for 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 reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

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