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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has imposed a cap on the peso to tame soaring inflation and now it is artificially high and reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, 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.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to control inflation in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a shaky result in local polls and multiple corruption scandals. Only massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing reckless spending, he recently dropped a promise to make large tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.