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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and now it is artificially high and reserves are exhausted, leaving the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring price rises in check. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he recently dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals 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 are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.