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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

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

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the election is over. President Javier Milei has placed a cap on the peso to control soaring price increases and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to bring price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But investors started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to portray Farage as planning to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid a heavy price.