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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is now,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency after the election is over. The president has placed a cap on the currency to tame triple-digit price increases and now it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to bring price rises in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately after a shaky result in local polls and a series of graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand in the face of elite opposition.

The Reform leader to date outlined limited plans in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, 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 appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.