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“Exchange, exchange.” Under the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the election concludes. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it remains overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

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 for decades to leftwing populism, such as the influential Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing forceful measures to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

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

The opposition aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual promises something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be a tenth less in countries run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.