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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency after the election concludes. The president has imposed a cap on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim control of the economy from traditional elites for the benefit of the people.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely large-scale economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently abandoned a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.