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“Dollars, dollars.” Under the scorching heat, scores of money changers are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and currently it remains artificially high and reserves are exhausted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

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, such as the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who styles 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 – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to bring inflation 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 slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and multiple graft allegations. Only large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

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