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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Only massive economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage 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 rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of planning reckless spending, he recently abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

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

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.