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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting concludes. The president has imposed a cap on the currency to control soaring inflation and now it remains artificially high and reserves are depleted, leaving the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to control price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid significant costs.