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“Cambio, cambio.” Under the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the greenback.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting concludes. President Javier Milei has imposed a limit on the currency to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, as well as 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.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to control price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months following a poor performance in local polls and multiple corruption scandals. Only massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he recently abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

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

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures 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 is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.