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“Exchange, exchange.” Under the scorching heat, scores of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. The president has imposed a limit on the peso to tame soaring inflation and now it is overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked 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 powerful Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.