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“Cambio, cambio.” Under the scorching heat, scores of currency traders are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso after the voting is over. President Javier Milei has placed a limit on the currency to control soaring inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally 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 ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to control price rises in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning reckless spending, he recently abandoned a pledge to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the researchers.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

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.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.