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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso after the election is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and currently it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

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 rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.