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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to holding the US dollar.

“The best time to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the election is over. The president has imposed a limit on the currency to tame triple-digit inflation and currently it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.