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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the national currency once the election concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and currently it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Solely massive economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, 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. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict there between rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

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

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.