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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has placed a cap on the peso to control soaring price increases and currently it remains overvalued and reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a shaky result in provincial elections and multiple graft allegations. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

Farage has so far committed few policies to paper except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently abandoned a promise to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray Farage as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.