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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small 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 currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the voting concludes. The president has imposed a limit on the peso to tame triple-digit price increases and now it is artificially high and foreign reserves are depleted, leaving the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

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

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda in recent months after a poor performance in local polls and a series of graft allegations. Solely large-scale economic support by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing reckless spending, he recently dropped a promise to make large tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

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

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found 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.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing significant costs.