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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country long used to holding the greenback.

“The best time to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency once the election is over. The president has placed a cap on the currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful measures to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Solely massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as planning to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.