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“Dollars, dollars.” Under the scorching heat, scores of currency traders are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the national currency after the election is over. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and currently it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring price rises under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he lately abandoned a promise to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.