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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The optimal moment for purchasing is currently,” says 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 across the spectrum anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it is overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

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

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back command of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to bring inflation in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple graft allegations. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, 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. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.