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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency once the voting is over. The president has imposed a limit on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control inflation in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a promise for large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures 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 that even when their policies fail, populists immediately pay the price 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 by external aid, the Argentine people are already bearing a heavy price.