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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency once the election concludes. The president has imposed a limit on the currency to control soaring price increases and currently it is overvalued and reserves are depleted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Only massive economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he lately dropped a pledge to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves 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. “Reform is funded by affluent backers calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head is often a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.