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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the US dollar.

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

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the voting concludes. The president has placed a cap on the currency to control soaring inflation and now it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to control price rises in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and multiple graft allegations. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.