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“Cambio, cambio.” Under the blazing sun, scores of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. President Javier Milei has imposed a limit on the currency to control soaring price increases and currently it is overvalued and reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim control of the economy from traditional elites for the benefit of the people.

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 champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to bring price rises in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of proposing reckless spending, he lately dropped a pledge to make significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid significant costs.