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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the election is over. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.