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

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

Like her, economic experts from all backgrounds expect a devaluation of the national currency once the election concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately 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 bring price rises under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing reckless spending, he recently dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as intending to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.