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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it is artificially high and reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control inflation in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of proposing reckless spending, he recently dropped a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as intending to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension here between rich backers seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average 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 at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But returning to 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 significant costs.