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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the voting is over. The president has placed a cap on the currency to control soaring price increases and now it is artificially high and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.