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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. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency once the voting is over. The president has imposed a cap on the peso to control soaring price increases and currently it remains artificially high and reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronism, and now the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as planning to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.