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“Cambio, cambio.” Under the scorching heat, scores of money changers are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the peso to control soaring inflation and currently it remains overvalued and reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

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

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices 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 poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he recently dropped a promise to make large tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual promises something unique).

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 that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.