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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the election concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control inflation in check. The programme shares similarities 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 began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Only large-scale economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as planning to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for lower taxes and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual promises something unique).

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, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

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

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.