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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to tame triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner to the north, and by 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 earned praise from the IMF for contributing to bring inflation in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Only massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of being accused of proposing reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to depict Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

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