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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a limit on the peso to tame soaring inflation and currently it is artificially high and reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: concerned about being accused of planning reckless spending, he recently dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to portray the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research 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, GDP per capita is often 10% lower in nations run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.