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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to saving in the US dollar.

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

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election concludes. The president has imposed a limit on the currency to tame soaring inflation and now it remains artificially high and reserves are depleted, leaving the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing forceful policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only massive financial intervention from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge for large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as intending to reintroduce fiscal tightening – a point 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 demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates 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 from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in nations run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing a heavy price.