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“Dollars, dollars.” Under the scorching heat, scores of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to control triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of planning reckless spending, he lately dropped a promise to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension here among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.