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“Exchange, exchange.” Under the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has imposed a cap on the peso to tame soaring inflation and now it remains overvalued and reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the powerful Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he recently abandoned a promise for large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.