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“Dollars, dollars.” Under the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting is over. The president has placed a limit on the peso to tame soaring inflation and currently it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising forceful measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Only massive economic support by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. 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 fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he lately dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader 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. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.