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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has placed a cap on the peso to tame soaring price increases and currently it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Only large-scale economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He wants 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 appear to be unsettled: wary of being accused of planning reckless spending, he recently abandoned a promise to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to depict Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.