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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency once the election concludes. The president has imposed a limit on the peso to tame soaring price increases and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies in writing except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise for large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But back in 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 a heavy price.