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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide 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 devaluation of the Argentine peso after the election concludes. The president has placed a limit on the currency to control triple-digit inflation and currently it remains overvalued and reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control price rises under control. 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 defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had 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 elite opposition.

Farage has so far committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he recently abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance 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 a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the researchers.

A further interesting result from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.