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“Dollars, dollars.” Under the blazing sun, dozens of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the election is over. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control price rises in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he lately dropped a promise for large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as planning to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

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

Another intriguing finding from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

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