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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and now it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control price rises in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise 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 populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

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

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures 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 attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.