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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving 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, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the voting concludes. The president has placed a limit on the currency to control soaring inflation and currently it remains overvalued and reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Only large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, 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 proposing reckless spending, he recently dropped a pledge for significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined 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 is often 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.