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

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency after the voting is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it remains artificially high and reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents 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 – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and multiple graft allegations. Solely massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to portray Farage as intending to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (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. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.