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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency after the voting is over. The president has imposed a limit on the peso to control triple-digit inflation and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to bring price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as intending to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.