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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to tame soaring inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful measures to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

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

The Reform leader to date committed few policies to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a promise to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as planning to reintroduce fiscal tightening – an argument the chancellor 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 is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there among rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.