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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the voting concludes. The president has placed a cap on the peso to tame soaring inflation and now it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to control inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be 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 confident resolve to implement public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this position will enable it to portray the populist as planning to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.