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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

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

Like her, economists across the spectrum anticipate a depreciation of the national currency after the election is over. The president has placed a cap on the peso to tame soaring price increases and now it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to enact public demand despite elite opposition.

Farage has so far committed few policies to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average 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 “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.