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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to holding the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has placed a cap on the currency to tame triple-digit price increases and currently it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control price rises under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and multiple graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for planning reckless spending, he recently dropped a pledge to make large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.