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“Cambio, cambio.” Under the scorching heat, scores of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency after the election is over. President Javier Milei has imposed a cap on the currency to tame soaring inflation and now it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. 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 slain, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date outlined limited plans to paper aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part 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 dropped a promise for significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes 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 emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer 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, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

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

In other words, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

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