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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency once the voting concludes. The president has imposed a limit on the peso to tame soaring inflation and now it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back command of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and a series of graft allegations. Solely large-scale economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a promise for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

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

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.