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“Exchange, exchange.” Under the blazing sun, dozens of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the currency to tame soaring price increases and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back control of economic management from traditional elites on behalf of the people.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to bring price rises in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

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

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.