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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation accustomed to saving in the US dollar.

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

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election concludes. President Javier Milei has imposed a cap on the peso to tame soaring inflation and now it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after 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.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, 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 position will allow it to depict Farage as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.