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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the election is over. The president has placed a cap on the currency to tame triple-digit price increases and currently it is artificially high and foreign reserves are depleted, causing the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation 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 influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing reckless spending, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for 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 among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed 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 nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four 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 regain sovereignty, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.