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“Dollars, dollars.” Under the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the national currency after the election concludes. The president has imposed a limit on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage to date outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

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

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.