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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling American currency on 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 best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the voting is over. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and now it is artificially high and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to control inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and multiple graft allegations. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to depict Farage as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

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.