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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. The president has imposed a limit on the peso to control triple-digit price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who styles 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 widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and multiple graft allegations. Only massive financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this position will allow it to portray Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research 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, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to similar economies 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 tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.