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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the national currency after the voting is over. The president has imposed a cap on the currency to control triple-digit inflation and currently it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back command of economic management from traditional elites for the benefit of the people.

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

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation 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 shaky result in provincial elections and a series of graft allegations. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here between rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.