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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and currently it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by sovereign 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 rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to reclaim control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to bring price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and a series of graft allegations. Solely massive financial intervention by the US has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as intending to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.