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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the US dollar.

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

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has placed a limit on the peso to tame soaring price increases and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader claims to offer something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.