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“Dollars, dollars.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. The president has placed a limit on the currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, leaving the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour 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 approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.