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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the peso to control soaring inflation and now it remains artificially high and reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

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

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

These defining traits are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of corruption scandals. Only massive economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader to date committed few policies in writing except for a call for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he recently abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, 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, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.