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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the voting is over. The president has imposed a cap on the currency to tame triple-digit price increases and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

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

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.