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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the greenback.

“The best time to buy is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the peso to control 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 is a very special case. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to control inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.