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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time to buy is currently,” states a arbolito, refusing to provide 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 devaluation of the Argentine peso after the election concludes. The president has imposed a limit on the currency to control triple-digit inflation and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to bring inflation in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict Farage as planning to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.