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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a depreciation of the national currency after the election is over. President Javier Milei has placed a cap on the peso to tame soaring price increases and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.