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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the peso to tame soaring price increases and now it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from a call for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to depict Farage as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.