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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is currently,” states a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the election concludes. President Javier Milei has imposed a limit on the currency to control soaring price increases and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to reintroduce austerity – an argument 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 affluent backers calling for tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” 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, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.