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“Cambio, cambio.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the election is over. The president has placed a cap on the currency to control triple-digit price increases and now it is overvalued and reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to control price rises under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention 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, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.