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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency once the voting is over. President Javier Milei has placed a limit on the currency to control triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for helping to control inflation in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of graft allegations. Only large-scale economic support from abroad has prevented 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, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he recently dropped a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.