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“Dollars, dollars.” Under the blazing sun, 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 midterm elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the peso to control soaring inflation and now it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to control price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

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

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.