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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the election concludes. President Javier Milei has placed a cap on the currency to tame soaring price increases and now it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a pledge to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict the populist as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

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

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.