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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency after the election concludes. The president has placed a limit on the currency to control triple-digit inflation and now it is artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to bring price rises under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed 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 mass deportations, 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 being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita is often a tenth less 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,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.