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“Cambio, cambio.” Under the blazing sun, scores of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a cap on the currency to tame triple-digit price increases and currently it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But investors started to doubt 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.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

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

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid a heavy price.