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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is now,” states one 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 from all backgrounds expect a devaluation of the Argentine peso after the voting concludes. The president has imposed a cap on the peso to control soaring price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage has so far 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 rein in the central bank, perhaps even replacing its head, Andrew Bailey, 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 proposing a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.