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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

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

Like her, economic experts across the spectrum anticipate a devaluation of the national currency after the election is over. The president has placed a cap on the peso to tame triple-digit price increases and now it is overvalued and reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes 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 leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.