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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment 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 will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting concludes. The president has placed a cap on the currency to tame soaring inflation and now it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back command of the economy from the establishment for the benefit of the people.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring inflation in check. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

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 a heavy price.