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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency after the election is over. The president has imposed a cap on the peso to tame soaring price increases and now it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising muscular policies to wrestle back command of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often 10% lower in nations run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.