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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.