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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The best time to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the national currency after the election concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing forceful policies to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Only massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as planning to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual promises 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, GDP per capita tends to be a tenth less in countries run by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.