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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to tame soaring price increases and now it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Only large-scale economic support by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves 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 very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in similar economies with more mainstream regimes.

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

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

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 a heavy price.