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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The best time to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the peso to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular measures to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and a series of corruption scandals. Only massive economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to comparable countries with more mainstream regimes.

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

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid a heavy price.