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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election concludes. The president has placed a cap on the currency to control triple-digit inflation and now it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back command 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, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a shaky result in local polls and multiple graft allegations. Only massive economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise for large tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict the populist as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing 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 reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.