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“Dollars, dollars.” Under the blazing sun, scores of money changers are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has placed a cap on the peso to control soaring price increases and currently it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to reclaim command of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.