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

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

Like her, economic experts across the spectrum expect a devaluation of the national currency once the voting concludes. The president has imposed a cap on the peso to tame soaring inflation and now it is overvalued and reserves are depleted, 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 hit by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to reclaim control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Only massive economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to depict the populist as intending to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

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

Another intriguing finding from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.