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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation long used to holding the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the voting concludes. President Javier Milei has imposed a limit on the currency to tame soaring inflation and currently it is artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful measures to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring price rises under control. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this position will allow it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.