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“Dollars, dollars.” Under the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the greenback.

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

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.