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“Exchange, exchange.” Under the scorching heat, scores of money changers are hawking US dollars on Florida Street, a lively pedestrian strip 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 greenback.

“The best time to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has imposed a cap on the currency to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to bring inflation under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this position will allow it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.