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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency once the voting is over. The president has imposed a cap on the peso to control soaring price increases and now it remains artificially high and reserves are depleted, leaving the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to wrestle back 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 people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from the IMF 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 also saw rising prices as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and multiple corruption scandals. Only large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well 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, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist leaders than in comparable countries with more mainstream regimes.

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

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

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