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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to control triple-digit inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely massive economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a pledge for large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as planning to bring back austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures 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 “take back control”, their appeal reaches beyond mundane economics.

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