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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. The president has imposed a cap on the peso to control triple-digit inflation and currently it remains artificially high and reserves are depleted, leaving the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim command of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

Farage to date committed few policies in writing except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run 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,” argue the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.