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“Cambio, cambio.” Under the scorching heat, dozens 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 October 26 midterm elections in a nation long used to holding the greenback.

“The best time to buy is now,” states a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to control triple-digit inflation and now it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing forceful policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to control price rises under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and a series of graft allegations. Only large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he recently dropped a promise for large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.