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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a limit on the peso to tame soaring inflation and now it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising muscular measures to wrestle back command of the economy from the establishment on behalf of the people.

These key characteristics are shared by his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to control price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he lately dropped a promise to make large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.