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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to holding the greenback.

“The optimal moment to buy is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has placed a limit on the peso to control triple-digit inflation and currently it is artificially high and reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

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

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

Farage has so far committed few policies in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge to make large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of working people and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, 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, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.