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

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election concludes. The president has placed a cap on the peso to tame triple-digit inflation and currently it is artificially high and reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by 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 public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control price rises under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review 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 rulers than in similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.