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“Dollars, dollars.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. The president has imposed a cap on the peso to control soaring inflation and now it is artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda lately after a shaky result in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he recently abandoned a pledge for significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.