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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to holding the greenback.

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

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election concludes. The president has imposed a cap on the currency to control triple-digit price increases and now it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage has so far committed few policies to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring 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 distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries 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 with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.