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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the voting is over. The president has imposed a limit on the currency to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, promising muscular policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to bring price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans in writing except for a call for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing reckless spending, he recently abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.