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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the national currency once the election is over. The president has imposed a limit on the peso to control triple-digit price increases and now it is artificially high and reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been 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 powerful Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful policies to reclaim command of economic management from traditional elites for the benefit of the people.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a shaky result in local polls and a series of corruption scandals. Only massive economic support from abroad has prevented what seemed destined to be a major 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 the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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