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

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

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the voting concludes. The president has imposed a limit on the currency to tame soaring price increases and currently it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back command of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However 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 from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he lately dropped a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.