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

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the national currency once the election concludes. The president has imposed a cap on the peso to control triple-digit price increases and now it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular policies to wrestle back control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to bring price rises in check. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise for large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to depict the populist as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, though, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.