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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the voting is over. The president has imposed a cap on the currency to tame triple-digit price increases and currently it remains artificially high and reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to bring price rises under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Solely large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.