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“Exchange, exchange.” Under the scorching heat, scores of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the election is over. President Javier Milei has placed a limit on the currency to control soaring inflation and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit 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 Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – 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 that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray Farage as intending to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.