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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

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

Like her, economists across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it is artificially high and reserves are exhausted, leaving the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in local polls and a series of corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he recently abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists 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 analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.