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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the greenback.

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

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso after the voting concludes. President Javier Milei has placed a cap on the peso to control triple-digit inflation and currently it remains overvalued and reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

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

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and multiple graft allegations. Only massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of being accused of proposing reckless spending, he recently dropped a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed 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 a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” 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, compared with four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.