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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame soaring inflation and now it is artificially high and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, such as the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who presents 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 budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly replacing its head, the incumbent, with scepticism 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 dropped a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict Farage as intending 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 are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita is often 10% lower in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

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