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“Dollars, dollars.” Under the blazing sun, scores of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the voting is over. The president has imposed a cap on the peso to tame triple-digit price increases and now it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to control inflation 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 slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Solely massive financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to enact public demand in the face of elite opposition.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing reckless spending, he recently abandoned a promise to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as planning to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita is often a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, populist figures 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 that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.