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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the currency to control triple-digit price increases and now it is artificially high and reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim command of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and a series of graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a promise for large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

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

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.