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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency after the voting concludes. The president has imposed a cap on the currency to control soaring price increases and now it is artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries run 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,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.