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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The best time for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the election concludes. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to bring inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months 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 in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.