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“Dollars, dollars.” Under the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the national currency after the voting concludes. President Javier Milei has placed a cap on the currency to control triple-digit price increases and now it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing forceful measures to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to bring price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a poor performance in local polls and multiple corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.