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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to holding the US dollar.

“The best time to buy is currently,” says 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 expect a depreciation of the national currency after the election concludes. The president has imposed a cap on the currency to control triple-digit price increases and currently it remains artificially high and reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back control of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for contributing to control inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer 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, GDP per capita tends to be 10% lower in nations run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.