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

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. The president has imposed a limit on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing forceful measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper aside from 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 the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here among rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined 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 countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.