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“Exchange, exchange.” Under the blazing sun, scores of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

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

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the election is over. The president has placed a cap on the peso to control triple-digit inflation and now it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising muscular measures to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control price rises in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and a series of graft allegations. Only large-scale economic support from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from proposals for large-scale removals, that he later 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 being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

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