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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to tame soaring inflation and now it remains artificially high and foreign reserves are depleted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to control price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element 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 abandoned a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as planning to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.