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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency once the election concludes. President Javier Milei has placed a cap on the currency to tame triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of planning reckless spending, he lately abandoned a promise for large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.