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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a cap on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to control inflation in check. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement public demand in the face of elite opposition.

Farage to date outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict Farage as intending to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.