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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to saving in the US dollar.

“The best time to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the voting concludes. President Javier Milei has placed a cap on the peso to control triple-digit price increases and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, and by 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 widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring price rises in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Solely massive economic support from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension here among rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed 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 nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain 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.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.