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“Dollars, dollars.” Under the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation accustomed to holding the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso after the election concludes. The president has imposed a limit on the peso to tame triple-digit inflation and currently it remains artificially high and reserves are depleted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control price rises in check. This plan has something in common with the policies 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 shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

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 outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing significant costs.