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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the currency to control triple-digit inflation and currently it remains overvalued and reserves are depleted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to control inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Solely massive economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies in writing aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning reckless spending, he lately dropped a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to comparable countries under conventional leadership.

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

A further interesting result from the study, though, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.