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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the voting concludes. The president has imposed a cap on the peso to tame soaring price increases and now it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

Farage has so far outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

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 is often a tenth less in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

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