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“Cambio, cambio.” Under the blazing sun, scores of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small 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 currently,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the voting concludes. The president has imposed a limit on the currency to control triple-digit price increases and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim control of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of graft allegations. Only massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for large 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 depict Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed 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 10% lower in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

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