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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. The president has imposed a cap on the peso to control triple-digit price increases and now it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage has so far committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb 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 appear to be in flux: wary of facing criticism for planning reckless spending, he recently abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals 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 retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.