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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the election is over. The president has imposed a cap on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal 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 a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

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

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.