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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has imposed a cap on the peso to tame soaring inflation and currently it remains artificially high and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to bring price rises in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from a call for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he recently abandoned a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader claims to offer something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers than in comparable countries under conventional leadership.

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

A further interesting result of the research, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people are already bearing significant costs.