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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the voting concludes. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing forceful measures to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to bring price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he recently abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

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