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“Dollars, dollars.” Under the scorching heat, 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 October 26 congressional elections in a nation long used to holding the US dollar.

“The best time to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has imposed a cap on the peso to tame triple-digit inflation and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to bring price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.