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“Dollars, dollars.” Under the blazing sun, dozens of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country accustomed to holding the greenback.

“The best time to buy is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso once the election concludes. The president has imposed a cap on the currency to control triple-digit price increases and now it is artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful measures to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control inflation under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Only large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in countries governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.