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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is currently,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency after the voting is over. The president has placed a cap on the currency to control soaring inflation and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance will enable it to portray the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions 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 emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in nations 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 with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.