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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election is over. President Javier Milei has imposed a limit on the currency to control soaring inflation and currently it remains overvalued and reserves are exhausted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed 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 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.