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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to 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 peso to tame soaring price increases and currently it remains overvalued and reserves are exhausted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of the people.

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

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to control price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple graft allegations. Solely large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray the populist as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.