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“Exchange, exchange.” Under the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election concludes. The president has placed a limit on the currency to tame soaring price increases and now it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

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

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. 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 defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

Farage to date committed few policies in writing except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.