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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to control soaring price increases and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to control price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.