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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting is over. President Javier Milei has imposed a cap on the peso to tame soaring price increases and currently it is overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim command of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in 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 extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a promise for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as planning to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline 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.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.

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

A further interesting result from the study, 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, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.