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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the election is over. The president has placed a cap on the currency to tame triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he lately dropped a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

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

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually 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 are often effective at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.