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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. The president has imposed a limit on the peso to tame soaring inflation and now it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid a heavy price.