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“Exchange, exchange.” Under the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting is over. The president has imposed a limit on the peso to control triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to bring price rises in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.