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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame soaring price increases and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to control inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he lately dropped a pledge for large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will allow it to depict Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.