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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the national currency once the voting is over. The president has imposed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to bring inflation in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and a series of graft allegations. Only large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he recently abandoned a promise to make large tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict Farage as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.