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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking 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 congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a limit on the currency to control soaring price increases and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices 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 multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.