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“Cambio, cambio.” Under the scorching heat, scores of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the election concludes. President Javier Milei has placed a cap on the peso to tame soaring price increases and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising forceful measures to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring inflation under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid significant costs.