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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation accustomed to holding the greenback.

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

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has placed a limit on the peso to control soaring inflation and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, 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 except for proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly 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 being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to portray Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.