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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. The president has imposed a limit on the peso to tame triple-digit price increases and currently it remains artificially high and reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control price rises in check. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Only large-scale economic support by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement public demand despite elite opposition.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in nations governed 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, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

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