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“Dollars, dollars.” Under the blazing sun, dozens of money changers are offering US dollars 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 greenback.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and now it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

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

These key characteristics are shared by his ally to the north, as well as Nigel Farage, 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, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a promise for significant tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.