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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a cap on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being 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 bring inflation in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of graft allegations. Solely massive economic support from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.