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“Cambio, cambio.” Under the blazing sun, scores of currency traders are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to holding the US dollar.

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

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. The president has imposed a limit on the currency to control triple-digit inflation and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate 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 forceful policies to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately following a shaky result in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper except for a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

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

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective 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, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.