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“Exchange, exchange.” Under the scorching heat, scores of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the election is over. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to control inflation under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact public demand despite elite opposition.

Farage has so far committed few policies in writing except for a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise 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 by external aid, Argentina’s citizens are already bearing significant costs.