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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the national currency once the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion 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 earned praise from international lenders for contributing to bring inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he lately abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when 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, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.