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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting is over. The president has placed a cap on the peso to tame soaring price increases and now it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Solely massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension here between rich backers who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.