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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the peso to tame soaring price increases and now it remains artificially high and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to reclaim control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control price rises under control. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of planning reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes 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 run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.