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

“The best time for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has placed a cap on the currency to control soaring inflation and currently it remains overvalued and reserves are exhausted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. 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 defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader promises something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.