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“Exchange, exchange.” Under the blazing sun, scores of money changers are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the greenback.

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

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the election is over. The president has placed a limit on the peso to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back command of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Solely massive economic support from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

Farage to date committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for planning reckless spending, he lately abandoned a promise for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray the populist as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, 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 attraction reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.