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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the greenback.

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

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso once the election is over. The president has imposed a limit on the currency to control triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally 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 privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to bring price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.