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“Cambio, cambio.” Under the blazing sun, scores of money changers are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful policies to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

Farage has so far outlined limited plans to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning reckless spending, he lately dropped a pledge for significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.