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“Dollars, dollars.” Under the scorching heat, dozens of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame triple-digit inflation and now it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he lately abandoned a pledge for significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

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

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.