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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the currency to tame soaring price increases and now it is artificially high and reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to bring inflation under control. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict the populist as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

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

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often 10% lower 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 from the study, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.