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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency once the election is over. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and now it remains artificially high and reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to reclaim command of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his political partner to the north, 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.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Only massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

Farage has so far committed few policies to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise for significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.