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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to saving in the greenback.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a cap on the peso to tame triple-digit inflation and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back control of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.