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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The best time for purchasing is currently,” says a 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 anticipate a devaluation of the Argentine peso once the voting concludes. The president has imposed a limit on the currency to control triple-digit inflation and now it is overvalued and reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising muscular measures to wrestle back command of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control price rises in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader 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 that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to 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.