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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a country accustomed to saving in the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency once the election concludes. The president has imposed a cap on the currency to tame triple-digit inflation and now it is overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he lately dropped a promise to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.