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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency once the voting concludes. The president has imposed a cap on the currency to control triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion 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 earned praise from international lenders for contributing to bring price rises under control. This plan has something in common with the policies 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 the government’s agenda in recent months after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for planning reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to depict the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

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 have already paid a heavy price.