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“Exchange, exchange.” Beneath 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 (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the election concludes. The president has imposed a cap on the currency to control soaring inflation and now it is artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim command of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control price rises in check. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid a heavy price.