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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to holding the US dollar.

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

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency after the election is over. The president has imposed a cap on the currency to control triple-digit inflation and currently it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely massive financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.