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“Dollars, dollars.” Under the blazing sun, scores of currency traders are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a depreciation of the national currency once the election is over. The president has imposed a limit on the currency to tame triple-digit price increases and now it is overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

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

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from international lenders for helping to bring inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a poor performance in local polls and a series of graft allegations. Solely massive 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 regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal 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 10% lower in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.