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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to holding the greenback.

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

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and now it remains artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim control of the economy from the establishment on behalf of the people.

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

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.