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“Cambio, cambio.” Under the scorching heat, scores of currency traders are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election is over. The president has placed a limit on the peso to control soaring price increases and currently it remains artificially high and reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to reclaim command of the economy from the establishment for the benefit of the people.

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

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning reckless spending, he lately abandoned a promise for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.