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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide 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 anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim command of economic management from traditional elites 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 pint-swilling people’s champion 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 the IMF for contributing to bring price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Only massive economic support by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.