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“Cambio, cambio.” Under the scorching heat, dozens of money changers are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the greenback.

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

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it remains artificially high and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim control of the economy 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 presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately following a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes 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 countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.