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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the greenback.

“The optimal moment to buy is now,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the national currency once the election is over. President Javier Milei has imposed a limit on the currency to control soaring price increases and now it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and multiple corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.