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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the election is over. The president has placed a limit on the currency to tame triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to bring price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Solely massive economic support by the US has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage to date committed few policies in writing except for proposals for mass deportations, that he later appeared to revise on the hoof. 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 unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to portray Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.