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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to holding the greenback.

“The best time to buy is now,” states a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting concludes. The president has placed a cap on the peso to tame soaring inflation and currently it remains overvalued and reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to reclaim control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge for large tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

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

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often 10% lower in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.