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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the peso to control soaring inflation and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become 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, dismissed doubts about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of planning reckless spending, he recently dropped a promise to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita is often a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.