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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to holding the greenback.

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

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso once the election concludes. The president has placed a limit on the peso to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring price rises under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, 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 facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to comparable countries under conventional leadership.

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

A further interesting result of the research, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.