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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the national currency once the election concludes. President Javier Milei has imposed a limit on the peso to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to bring inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

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

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to depict the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.