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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency once the election concludes. The president has placed a limit on the currency to tame soaring inflation and currently it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation in check. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of proposing reckless spending, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader claims to offer 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 countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, these leaders tend to be good 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 policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.