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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election concludes. The president has placed a cap on the peso to control triple-digit inflation and currently it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course 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. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.