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“Dollars, dollars.” Under the scorching heat, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to saving in the US dollar.

“The best time to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the voting is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and now it remains artificially high and reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to reclaim command of economic management from traditional elites for the benefit of the people.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of proposing reckless spending, he recently dropped a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to portray Farage as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.