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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the voting is over. The president has imposed a limit on the peso to control soaring inflation and currently it is overvalued and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim command of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Solely large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.