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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency after the voting is over. President Javier Milei has imposed a limit on the peso to control triple-digit price increases and now it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly 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 influential Peronism, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of proposing reckless spending, he lately abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

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

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.