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“Dollars, dollars.” Under the blazing sun, scores of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the US dollar.

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

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting is over. President Javier Milei has placed a cap on the peso to tame soaring inflation and currently it remains artificially high and reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim command of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge to make large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.