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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency once the voting is over. President Javier Milei has placed a limit on the currency to control soaring price increases and now it is artificially high and reserves are exhausted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing muscular policies to reclaim control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling 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 deep public spending cuts – had won plaudits from the IMF for contributing to bring inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately after a shaky result in local polls and multiple corruption scandals. Solely massive economic support from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he lately dropped a promise to make large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita is often 10% lower in countries governed by populist leaders compared to similar economies with more mainstream regimes.

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

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.