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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to saving in the greenback.

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

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has placed a limit on the currency to control triple-digit price increases and now it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a shaky result in local polls and multiple graft allegations. Solely massive economic support by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, 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 from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

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