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“Cambio, cambio.” Under the scorching heat, scores of currency traders are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation accustomed to holding the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has placed a cap on the currency to control triple-digit price increases and currently it is overvalued and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation 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 shaky result in provincial elections and multiple corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for planning reckless spending, he recently dropped a promise for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.