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“Cambio, cambio.” Under the scorching heat, dozens of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting is over. The president has imposed a limit on the currency to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his ally to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of proposing reckless spending, he recently dropped a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises something unique).

Recent research from a leading journal analysed the outcomes 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 10% lower in countries run by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.