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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election is over. The president has placed a limit on the peso to tame soaring price increases and currently it is overvalued and reserves are depleted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, 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 – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control inflation in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to depict the populist as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension here between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.