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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[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 depreciation of the national currency after the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and now it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim command of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely massive economic support by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he lately dropped a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.