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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the national currency after the voting is over. The president has imposed a limit on the peso to tame triple-digit inflation and now it is artificially high and reserves are depleted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.