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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the voting is over. President Javier Milei has placed a limit on the currency to control soaring price increases and currently it remains artificially high and reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to control price rises in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately following a shaky result in local polls and a series of graft allegations. Only massive economic support by the US has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.