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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election is over. The president has placed a limit on the peso to tame soaring price increases and now it is artificially high and reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to control price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation 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 shaky result in provincial elections and multiple graft allegations. Solely massive economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to implement public demand in the face of elite opposition.

Farage to date committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently dropped a promise to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray Farage as planning to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.