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“Dollars, dollars.” Under the scorching heat, dozens of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the greenback.

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

Like her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a cap on the peso to control triple-digit price increases and now it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he lately dropped a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray Farage as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

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

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.