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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the election concludes. The president has placed a cap on the peso to tame triple-digit inflation and now it is overvalued and reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Solely massive economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.