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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency once the voting concludes. The president has imposed a limit on the peso to tame triple-digit price increases and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a shaky result in local polls and a series of graft allegations. Only massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of planning a Liz Truss-style splurge, he lately dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as intending to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.