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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the voting is over. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and now it is overvalued and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.