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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the greenback.

“The best time to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency after the voting is over. The president has imposed a cap on the currency to control soaring inflation and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far committed few policies in writing except for a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a pledge to make large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.