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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has placed a cap on the currency to control triple-digit inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back command of the economy from the establishment on behalf of the people.

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 privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control inflation in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing reckless spending, he recently abandoned a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes 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 among rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

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

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.