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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has placed a cap on the peso to tame triple-digit price increases and currently it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular measures to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple corruption scandals. Only large-scale economic support by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he recently dropped a promise to make large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to depict Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.