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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the US dollar.

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

Like her, economists across the spectrum anticipate a devaluation of the national currency once the voting is over. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and now it remains overvalued and reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing muscular policies to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to control price rises under control. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there among rich backers seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal examined the performance 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 countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.