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“Exchange, exchange.” Under the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to tame soaring price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim control of economic management from the establishment on behalf of the people.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control inflation in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

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 aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for planning reckless spending, he recently abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

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

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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