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“Dollars, dollars.” Under the scorching heat, scores of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country accustomed to saving in the greenback.

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

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the peso to tame soaring price increases and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to control price rises under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.