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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The optimal moment to buy is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has imposed a cap on the currency to tame soaring inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Only massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

Farage to date committed few policies in writing except for a call for mass deportations, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he lately dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined 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 tends to be 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.