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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to control soaring price increases and now it remains artificially high and reserves are depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

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

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

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises under control. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he lately abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita is often 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing significant costs.