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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the voting concludes. President Javier Milei has imposed a cap on the peso to tame soaring inflation and currently it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to control price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to implement public demand in the face of elite opposition.

Farage to date outlined limited plans to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.