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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting concludes. The president has placed a cap on the peso to tame triple-digit price increases and now it is overvalued and reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to reclaim control of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring price rises under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However financial markets 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 economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

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

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants 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 unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as planning to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, 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 despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.