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“Dollars, dollars.” Under the scorching heat, scores of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the greenback.

“The optimal moment to buy is currently,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the election concludes. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and currently it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, possibly 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: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

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

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders are often effective at retaining office, 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 face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.