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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to saving in the greenback.

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

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a cap on the currency to control triple-digit price increases and now it is artificially high and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

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

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man despite being a public school-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 bring inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

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 financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal 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 is often a tenth less in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.