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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency after the voting concludes. President Javier Milei has imposed a limit on the peso to control soaring price increases and currently it is artificially high and reserves are depleted, causing Argentina’s economy stagnant 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 over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in local polls and multiple graft allegations. Solely massive economic support from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as planning to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension here among rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price 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, the Argentine people have already paid a heavy price.