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“Exchange, exchange.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. The president has placed a cap on the currency to tame soaring inflation and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise to make large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.