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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering US dollars along 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 holding the US dollar.

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

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a cap on the currency to control soaring inflation and currently it is overvalued and reserves are depleted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally 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 privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, 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.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures 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 is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid significant costs.