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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. The president has imposed a limit on the peso to control triple-digit inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to 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 its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control price rises under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader has so far committed few policies to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid a heavy price.