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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting is over. The president has placed a limit on the currency to tame triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

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

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of planning reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.