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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country long used to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election is over. The president has placed a limit on the peso to tame triple-digit inflation and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion 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 earned praise from the IMF for contributing to bring price rises under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

Farage to date committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.