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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency after the election concludes. The president has placed a limit on the peso to control soaring price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful measures to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to bring price rises under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices 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 local polls and a series of graft allegations. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage to date committed few policies to paper except for a call for mass deportations, that he later appeared to revise on the hoof. 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: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to portray the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers who want radical free-market policies, 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 confronting real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to 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.