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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has placed a cap on the peso to tame soaring price increases and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are shared by his ally to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion 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 earned praise from international lenders for helping to control inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, 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 graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes 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 run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.