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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the US dollar.

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

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the currency to control soaring inflation and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These defining traits are shared by his political partner to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and a series of graft allegations. Solely large-scale economic support by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of planning reckless spending, he recently abandoned a promise to make large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the performance 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 run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four 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 “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.