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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a lively shopping street 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 holding the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it is overvalued and reserves are depleted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular policies to wrestle back control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies to paper except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.