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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the election concludes. The president has imposed a limit on the peso to control soaring inflation and currently it remains overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to portray Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, however, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.