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“Cambio, cambio.” Under the scorching heat, dozens of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election concludes. The president has imposed a limit on the peso to tame triple-digit price increases and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing forceful measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring price rises in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.