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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the US dollar.

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

Like her, economic experts from all backgrounds expect a devaluation of the national currency once the voting is over. The president has placed a cap on the currency to control triple-digit inflation and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim control of economic management from the establishment on behalf of the people.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring inflation under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Only massive financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand in the face of elite opposition.

The Reform leader has so far committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically 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, populist figures are often effective at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.