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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the currency to tame soaring price increases and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular measures to wrestle back command of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, 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 recently dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.