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“Cambio, cambio.” Under the scorching heat, scores of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The best time to buy is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency once the election is over. The president has placed a cap on the peso to control soaring inflation and now it remains artificially high and reserves are exhausted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back command of economic management 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, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. 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 the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Solely massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting 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 reduced rules, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader promises something unique).

A recent paper from a leading journal analysed 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 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.