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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful measures to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to control inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months following a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader 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 typically, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders than in similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.