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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to saving in the greenback.

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

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency once the election is over. President Javier Milei has imposed a cap on the currency to control soaring price increases and now it is overvalued and foreign reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to control inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray the populist as planning to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

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

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.