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“Dollars, dollars.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the voting is over. President Javier Milei has placed a cap on the currency to control soaring inflation and now it is artificially high and reserves are exhausted, leaving the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful measures to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a poor performance in local polls and multiple corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.