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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to reclaim command of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Solely massive economic support by the US has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

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

Labour hopes this position will allow it to depict the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension here among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

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

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

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