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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the US dollar.

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

Like her, economic experts across the spectrum expect a depreciation of the national currency once the voting is over. The president has placed a cap on the peso to control soaring inflation and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation in check. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for planning reckless spending, he lately dropped a promise to make significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.