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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. The president has placed a limit on the currency to tame soaring price increases and now it is artificially high and reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a poor performance in local polls and multiple corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans in writing except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, 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 fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.