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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to saving in the greenback.

“The best time to buy is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the voting concludes. President Javier Milei has placed a limit on the peso to tame triple-digit inflation and now it is artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Only massive economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in countries run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.