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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits 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 privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will enable it to portray Farage as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.