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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the election is over. The president has imposed a limit on the peso to control soaring inflation and now it is artificially high and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular measures to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to control inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.