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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso after the voting concludes. The president has imposed a cap on the peso to control triple-digit inflation and currently it is artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to reclaim control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.