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“Dollars, dollars.” Under the blazing sun, scores of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country accustomed to saving in the greenback.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the voting concludes. The president has placed a cap on the peso to tame triple-digit price increases and currently it is artificially high and reserves are depleted, leaving the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

Farage to date committed few policies in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

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

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.