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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame soaring inflation and currently it is artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and currently Milei’s conservative populism.

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

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to control inflation in check. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a shaky result in local polls and a series of graft allegations. Only massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage has so far outlined limited plans to paper except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there exist inconsistencies 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 complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.