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“Cambio, cambio.” Under the blazing sun, dozens of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the greenback.

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

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has placed a limit on the peso to tame triple-digit inflation and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful measures to reclaim command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of planning reckless spending, he recently dropped a pledge for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders compared to similar economies with more mainstream regimes.

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

Another intriguing finding from the study, though, 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 four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to 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.