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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has imposed a limit on the peso to tame soaring inflation and currently it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim command 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 Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only massive economic support from abroad has averted what looked set to become a major monetary collapse.

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 confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here among 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 neither left nor right populists often perform poorly when confronting practical difficulties (though of course 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. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.