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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency after the election concludes. President Javier Milei has placed a cap on the peso to control triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

Farage has so far committed few policies in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.