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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her identity. “[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 Argentine peso once the election is over. The president has placed a cap on the peso to control triple-digit inflation and currently it remains artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are shared by his ally to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring price rises under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage has so far committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

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 regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.