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

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the voting concludes. The president has placed a cap on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as buyers turn to 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 for decades to left-leaning populist movements, such as the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and multiple graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement public demand despite elite opposition.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he recently dropped a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual 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. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.