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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election concludes. The president has imposed a cap on the peso to tame soaring price increases and now it remains overvalued and reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful measures to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of planning reckless spending, he lately dropped a pledge for large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

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

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid significant costs.