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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency after the election concludes. President Javier Milei has imposed a cap on the currency to control soaring price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans 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, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.