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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states one 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 anticipate a depreciation of the Argentine peso after the voting is over. The president has imposed a limit on the peso to tame triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as planning to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, 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 shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.