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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame soaring price increases and currently it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to bring price rises in check. The programme has something in common with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Solely massive economic support from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict the populist as planning to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.