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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to holding the greenback.

“The best time to buy is now,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to control soaring inflation and currently it remains overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to bring inflation in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning reckless spending, he recently abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance 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 strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story 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 every populist leader promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

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