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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the election is over. The president has placed a limit on the peso to control soaring price increases and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to control inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray Farage as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

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

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders than in comparable countries under conventional leadership.

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

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid a heavy price.