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“Exchange, exchange.” Under the scorching heat, scores of money changers are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to holding the US dollar.

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

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to tame triple-digit price increases and now it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control inflation in check. This plan has something in common with the policies of Milei’s idol 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 in recent months after a shaky result in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.