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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to holding the greenback.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency once the election is over. The president has imposed a limit on the currency to control soaring price increases and now it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in 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 ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to bring inflation under control. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far committed few policies to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he recently abandoned a promise for significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray Farage as planning to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita tends to be a tenth less in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise 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 have already paid significant costs.