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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. The president has imposed a cap on the peso to control triple-digit inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as intending to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension here among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

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 regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.