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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the national currency after the election is over. The president has placed a cap on the peso to control triple-digit inflation and currently it remains artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now the president’s rightwing version.

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

These defining traits are also seen in his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring price rises under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But 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 financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, 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.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.