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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country long used to saving in the US dollar.

“The best time to buy is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a cap on the peso to tame soaring price increases and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, 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 aims this position will enable it to depict Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with 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. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.