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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders 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 26 October congressional elections in a country accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the voting is over. The president has placed a cap on the peso to control triple-digit price increases and now it is overvalued and foreign reserves are depleted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence 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 from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.