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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso once the voting is over. The president has imposed a limit on the peso to tame triple-digit inflation and currently it remains overvalued and foreign reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of corruption scandals. Solely massive economic support by the US has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

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, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict Farage as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at retaining office, 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, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

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