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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the currency to control triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring price rises under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension there between rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in countries governed by populist rulers than in comparable countries 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 even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.