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“Dollars, dollars.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. The president has imposed a limit on the currency to control soaring price increases and now it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, 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 – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for proposing reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray Farage as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

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

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.