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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to tame soaring inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of planning reckless spending, he recently dropped a pledge to make large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says 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, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in 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.