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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the currency to tame soaring price increases and now it is overvalued and reserves are exhausted, causing the national 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 economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

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

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring inflation in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and multiple graft allegations. Only large-scale financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of proposing reckless spending, he recently dropped a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict Farage as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

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

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

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