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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to saving in the greenback.

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

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has imposed a limit on the currency to tame soaring inflation and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan has something in common with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained 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” despite the establishment’s horror.

Farage to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.