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“Cambio, cambio.” Under the scorching heat, scores of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency once the voting is over. The president has imposed a cap on the currency to tame triple-digit inflation and now it is overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing reckless spending, he lately dropped a pledge for large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is 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 mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.