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“Cambio, cambio.” Under the blazing sun, scores of currency traders are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency after the election is over. President Javier Milei has imposed a limit on the peso to control soaring inflation and currently it remains overvalued and reserves are depleted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful measures to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to bring price rises in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

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

A further interesting result from the study, though, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences 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 sustained through foreign assistance, the Argentine people are already bearing significant costs.