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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the peso to control soaring price increases and currently it remains overvalued and reserves are depleted, leaving the national economy sluggish as buyers opt for 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 the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

Farage to date committed few policies in writing except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to portray Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.