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“Cambio, cambio.” Under the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. The president has imposed a cap on the currency to control soaring inflation and currently it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to control price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he lately dropped a promise to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, however, 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 shorter tenures for mainstream politicians.

In other words, 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 appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid significant costs.