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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country long used to saving in the US dollar.

“The optimal moment to buy is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the election is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and currently it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control inflation in check. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the researchers.

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.