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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to 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 to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the peso to tame soaring inflation and currently it is artificially high and reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of the economy from the establishment on behalf of the people.

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

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring inflation in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to portray the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.