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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the greenback.

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

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the peso to tame soaring price increases and currently it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back command of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of graft allegations. Solely large-scale economic support from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise for large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

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 tends to be 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.