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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, refusing to provide 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 devaluation of the national currency after the election concludes. President Javier Milei has placed a cap on the peso to tame triple-digit inflation and now it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back command of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he lately abandoned a promise to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as planning to bring back austerity – a point Rachel Reeves has emphasized often, 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 affluent backers calling for tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.