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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the national currency after the election is over. The president has imposed a cap on the currency to tame soaring price increases and currently it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to control price rises under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Only massive financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he lately dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing a heavy price.