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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a limit on the currency to control triple-digit price increases and now it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for 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 the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

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

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. 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, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as intending to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing significant costs.