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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the greenback.

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

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. The president has placed a cap on the peso to tame soaring price increases and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to bring price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, 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 lately after a shaky result in local polls and multiple corruption scandals. Solely massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing 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 concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.