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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country long used to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the voting is over. President Javier Milei has placed a limit on the currency to control triple-digit price increases and currently it is artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to bring inflation 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, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.