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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down 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. President Javier Milei has placed a limit on the peso to control soaring price increases and now it is overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation in check. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Only massive economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.