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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency once the election is over. The president has placed a cap on the peso to control triple-digit inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back command of economic management from the establishment on behalf of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for helping to bring inflation under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, 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 pledge to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as planning to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers who want radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.