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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the voting is over. The president has imposed a limit on the peso to tame soaring inflation and now it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of economic management from the establishment on behalf 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 people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.