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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency along 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 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 is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has placed a cap on the peso to tame soaring price increases and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Only massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.