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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency once the voting is over. The president has placed a cap on the currency to control triple-digit inflation and currently it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to bring price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to depict Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

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

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.