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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the voting is over. The president has imposed a limit on the peso to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of graft allegations. Only massive financial intervention by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a promise for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.