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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the election is over. The president has placed a limit on the currency to tame soaring price increases and currently it remains artificially high and reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Solely massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he recently dropped a promise for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there exist inconsistencies 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 talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.