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“Dollars, dollars.” Under the blazing sun, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to saving in the greenback.

“The best time to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the election concludes. The president has placed a limit on the peso to control triple-digit inflation and now it is overvalued and reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising muscular policies to reclaim command of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control price rises in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of proposing reckless spending, he lately dropped a promise for large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four 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. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid significant costs.