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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a lively shopping street 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 optimal moment to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso once the election concludes. President Javier Milei has imposed a limit on the peso to control soaring inflation and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to reclaim control of the economy from the establishment for the benefit of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement public demand despite elite opposition.

Farage has so far committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as planning to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for tax cuts and deregulation, but also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.