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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting is over. The president has imposed a limit on the peso to control triple-digit inflation and now it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, 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, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to control price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge to make large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray Farage as planning to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to similar economies with more mainstream regimes.

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

Another intriguing finding from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But 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.