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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has placed a limit on the peso to tame soaring price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.