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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency after the election concludes. President Javier Milei has imposed a limit on the peso to control triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to control inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Only large-scale financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

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 the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise for significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the outcomes 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 countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.