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

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency after the voting concludes. The president has placed a cap on the currency to control soaring inflation and currently it remains artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to reclaim command of economic management from the establishment 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 champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a pledge for large tax reductions. 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 the populist as planning to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, 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. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.