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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm 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 is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the currency to control triple-digit inflation and now it is artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing reckless spending, he lately dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will allow it to depict Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions 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’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes 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 is often a tenth less in countries run by populist rulers compared to comparable countries under conventional leadership.

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

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.