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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has placed a limit on the peso to tame soaring price increases and now it remains artificially high and reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his political partner to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Only massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage has so far committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to portray the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result of the research, though, 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.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.