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“Dollars, dollars.” Under the blazing sun, dozens of currency traders 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 nation accustomed to saving in the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. The president has imposed a cap on the currency to tame soaring price increases and now it is artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to control inflation under control. The programme has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.