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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to bring price rises under control. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in local polls and multiple graft allegations. Only large-scale economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict the populist as intending to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders 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 Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.