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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a lively 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 saving in the US dollar.

“The optimal moment to buy is currently,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the national currency once the voting is over. President Javier Milei has placed a cap on the currency to tame soaring price increases and currently it remains overvalued and reserves are depleted, leaving the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.