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“Cambio, cambio.” Under the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the election is over. The president has placed a limit on the currency to tame soaring inflation and now it is artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to bring price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

Farage to date outlined limited plans in writing except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he lately abandoned a pledge to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will allow it to depict Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.