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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the greenback.

“The best time to buy is now,” says one arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency once the voting concludes. The president has placed a cap on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to wrestle back command of the economy 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 public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to control inflation under control. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage has so far committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of planning reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in countries run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.