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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. The president has imposed a cap on the currency to control triple-digit inflation and now it remains artificially high and foreign reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing reckless spending, he recently abandoned a promise to make significant tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.