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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

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

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the election is over. The president has placed a cap on the currency to control triple-digit inflation and currently it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies 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 the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid significant costs.