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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the election concludes. The president has placed a limit on the currency to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises under control. 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 slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this position will allow it to depict the populist as planning to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often 10% lower in nations run by populist rulers compared to comparable countries under conventional leadership.

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

A further interesting result from the study, though, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.