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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the voting is over. The president has placed a cap on the peso to control triple-digit inflation and now it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

Farage to date committed few policies in writing except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for planning reckless spending, he lately dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this position will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer 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 typically, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.