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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency once the voting concludes. President Javier Milei has placed a cap on the currency to tame soaring price increases and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and a series of graft allegations. Only massive economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage to date committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.