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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to saving in the US dollar.

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

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso after the election concludes. The president has placed a limit on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to control inflation under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.