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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the US dollar.

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

Like her, economic experts across the spectrum expect a depreciation of the national currency after the election concludes. President Javier Milei has imposed a cap on the peso to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising muscular measures to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with the policies 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 in recent months after a shaky result in provincial elections and a series of corruption scandals. Only massive economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

Farage to date committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to portray Farage as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.