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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the election is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and now it is artificially high and reserves are depleted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim command of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when confronting practical difficulties (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. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid significant costs.