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“Cambio, cambio.” Beneath the blazing sun, dozens 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 ahead of the 26 October congressional elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has placed a cap on the peso to tame triple-digit inflation and currently it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful policies to wrestle back control of economic management from the establishment for the benefit of the people.

These key characteristics are shared by his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves 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. “Reform is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.