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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit price increases and currently it remains artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and now Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.