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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation accustomed to holding the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the peso to tame soaring inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit 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 Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. 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 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a pledge for large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as planning to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.