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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the election is over. The president has placed a limit on the currency to tame triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, 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, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.