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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election is over. The president has placed a cap on the currency to control soaring price increases and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum 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 the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to portray Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together 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 retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid significant costs.