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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling US dollars along Florida Street, a lively shopping street 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 best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the election concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to control inflation in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand 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 tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing a heavy price.