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“Dollars, dollars.” Under the blazing sun, scores of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down 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 after the voting is over. The president has placed a cap on the peso to tame soaring price increases and now it is overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising muscular policies to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and multiple corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge for large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita is often 10% lower in nations governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.