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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to holding the US dollar.

“The optimal moment to buy is currently,” states one arbolito, declining to give 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 concludes. The president has imposed a limit on the currency to tame triple-digit inflation and now it is overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to control inflation under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.