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

“The best time for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the voting concludes. The president has placed a cap on the peso to tame triple-digit inflation and currently it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in provincial elections and multiple corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers compared to similar economies under conventional leadership.

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

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.