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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The best time to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the election concludes. President Javier Milei has imposed a cap on the peso to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple corruption scandals. Only massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

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

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray Farage as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing significant costs.