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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to holding the greenback.

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

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election concludes. The president has placed a limit on the currency to control soaring inflation and now it is overvalued and reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim command of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing reckless spending, he recently abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to portray Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.