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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation long used to saving in the greenback.

“The best time for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting is over. The president has imposed a limit on the currency to control triple-digit inflation and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to control price rises in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Only massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage has so far committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of planning reckless spending, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist rulers than in comparable countries under conventional leadership.

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

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.