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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to saving in the greenback.

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

Similar to her, economic experts across the spectrum expect a devaluation of the national currency after the voting concludes. The president has imposed a limit on the currency to tame soaring price increases and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Only massive economic support by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, 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 says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.