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“Dollars, dollars.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. The president has placed a limit on the peso to control triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising muscular measures to reclaim command of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for contributing to control price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here between rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.