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“Cambio, cambio.” Under the scorching heat, scores of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the election is over. The president has imposed a cap on the currency to control triple-digit inflation and now it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back command of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he lately abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray Farage as intending to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader promises something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.