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

“The best time to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the election is over. President Javier Milei has imposed a limit on the peso to tame soaring price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to control price rises under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Only massive economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he recently dropped a pledge for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for 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 among rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is that 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 is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.