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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to saving in the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency after the voting is over. The president has placed a limit on the currency to tame triple-digit inflation and now it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular policies to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.