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“Dollars, dollars.” Under the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election concludes. 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 opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked 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 Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (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 that on average, after 15 years, GDP per capita is often a tenth less in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.