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“Exchange, exchange.” Under the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency once the election concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit inflation and now it is artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as intending to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

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

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.