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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the greenback.

“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.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso after the voting is over. The president has imposed a limit on the currency to tame triple-digit inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive economic support by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as planning to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict there among rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations 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 with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

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 significant costs.