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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency after the election concludes. President Javier Milei has placed a limit on the peso to control triple-digit price increases and now it is artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to control inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of being accused of planning reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed 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 tends to be 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures 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. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.