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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the voting is over. The president has imposed a cap on the currency to control triple-digit price increases and now it is overvalued and reserves are exhausted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and now Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful measures to wrestle back command of the economy from the establishment for the benefit of the people.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to control inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often a tenth less in countries governed by populist rulers than in similar economies under conventional leadership.

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

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.