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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country long used to holding the US dollar.

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

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a limit on the currency to control soaring inflation and now it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

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

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often 10% lower in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

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

A further interesting result of the research, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.