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“Cambio, cambio.” Under the scorching heat, scores of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has imposed a limit on the currency to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: concerned about being accused of proposing reckless spending, he recently dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual 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 is often a tenth less in nations run 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,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.