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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering 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 accustomed to saving in the US dollar.

“The best time for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim command of economic management from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to bring price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers calling for 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 between rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.