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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering US dollars 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 nation accustomed to holding the US dollar.

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

Like her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. The president has placed a limit on the peso to tame soaring inflation and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

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

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring price rises in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of planning reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, 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, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.