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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency once the election concludes. President Javier Milei has placed a limit on the peso to control triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

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 leftwing populism, such as the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim command of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Solely massive financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, these leaders 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 policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.