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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency after the voting concludes. President Javier Milei has placed a cap on the currency to control triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

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

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

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to bring inflation in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise for significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.