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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

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

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has imposed a cap on the peso to control triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular measures to wrestle back control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, 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.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring price rises in check. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to implement public demand despite the establishment’s horror.

Farage has so far outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise 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 tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he lately abandoned a pledge to make large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as intending to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.