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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to saving in the greenback.

“The best time to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the election concludes. The president has imposed a limit on the currency to tame soaring price increases and currently it remains artificially high and reserves are depleted, causing the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

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 people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Solely large-scale economic support by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he lately dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries 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.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.