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“Exchange, exchange.” 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 (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has placed a limit on the currency to control soaring inflation and now it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

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

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to control price rises in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. 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 kept on life support through foreign assistance, the Argentine people have already paid a heavy price.