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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation long used to saving in the US dollar.

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

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and now it is artificially high and foreign reserves are depleted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a poor performance in local polls and multiple corruption scandals. Solely massive economic support by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a promise to make significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.