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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a depreciation of the national currency once the voting concludes. The president has imposed a cap on the currency to tame soaring price increases and currently it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to control price rises in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain 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 appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.