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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to holding the greenback.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election concludes. The president has imposed a limit on the peso to control triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, leaving the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to portray the populist as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” argue the researchers.

A further interesting result of the research, however, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing significant costs.