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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the voting concludes. The president has placed a limit on the currency to tame triple-digit inflation and now it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful policies to wrestle back command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to control inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.