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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the election concludes. The president has placed a cap on the currency to tame triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. 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 influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only massive economic support from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he lately abandoned a promise to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.