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

“The best time for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. The president has imposed a cap on the peso to tame triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to reclaim command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns 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 aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to portray Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in 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.