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“Exchange, exchange.” Under the blazing sun, dozens of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has placed a limit on the currency to tame triple-digit price increases and now it remains overvalued and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing forceful policies to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to bring price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices 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 shaky result in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he lately abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this position will enable it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, the Argentine people are already bearing a heavy price.