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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country long used to holding the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[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 once the voting concludes. President Javier Milei has imposed a cap on the peso to control soaring price increases and now it is artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to reclaim command of economic management 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 presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and multiple graft allegations. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he lately dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as planning to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual promises something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.