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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election concludes. The president has placed a limit on the currency to control soaring price increases and now it is artificially high and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to reclaim command of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling 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 international lenders for contributing to bring price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

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

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he recently abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual claims to offer 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 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.