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“Exchange, exchange.” Under the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular measures to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to bring inflation in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

Farage has so far outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he lately dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to portray Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.