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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina 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 Peronism, and now Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim command of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple graft allegations. Only massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing reckless spending, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.