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“Cambio, cambio.” Under the scorching heat, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds expect a depreciation of the national currency after the election concludes. The president has imposed a cap on the peso to control soaring price increases and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

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

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.