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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street 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 US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a limit on the peso to tame triple-digit price increases and now it is artificially high and reserves are depleted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to reclaim command of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

Farage to date outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he lately abandoned a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.