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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it remains overvalued and foreign reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to wrestle back command of the economy from traditional elites for the benefit of the people.

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

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to control price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb 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 unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.