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“Exchange, exchange.” Under 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 before the October 26 congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has placed a cap on the peso to tame soaring inflation and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately following a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be 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 typically go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.