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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to tame soaring inflation and now it is overvalued and reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular measures to reclaim command of economic management from the establishment on behalf of the people.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control price rises in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and a series of graft allegations. Only large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.