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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

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

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting concludes. The president has placed a cap on the currency to tame triple-digit price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and a series of graft allegations. Only massive economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.