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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation accustomed to holding the greenback.

“The best time to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency once the voting is over. President Javier Milei has imposed a cap on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are depleted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, and by 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, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately after a shaky result in local polls and a series of graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain 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.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.