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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to 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 currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to control price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Only massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement public demand in the face of elite opposition.

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 curb the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning reckless spending, he lately dropped a promise to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as intending to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.