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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to saving in the greenback.

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

Like her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and now it remains artificially high and reserves are depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful policies to wrestle back control of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his ally in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Only massive economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.