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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is now,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election is over. The president has placed a cap on the peso to tame triple-digit inflation and now it is overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to reclaim command of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

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

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.