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“Dollars, dollars.” Under the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election concludes. The president has imposed a cap on the peso to tame triple-digit inflation and now it remains overvalued and reserves are depleted, leaving the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to reclaim control 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 Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping 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 defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.