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“Exchange, exchange.” Under the scorching heat, scores of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has placed a cap on the peso to tame soaring price increases and currently it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back command of economic management from traditional elites for the benefit of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to bring price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

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

Farage to date outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance 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 approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.