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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time to buy is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the election concludes. President Javier Milei has imposed a cap on the peso to control triple-digit inflation and now it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to bring price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people are already bearing significant costs.