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“Cambio, cambio.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The optimal moment to buy is now,” says 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 from all backgrounds expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a cap on the peso to control triple-digit inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back control of the economy from the establishment on behalf of the people.

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

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely massive economic support by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there between rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research 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 is often a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

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