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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the election is over. The president has placed a cap on the currency to control soaring inflation and now it is overvalued and reserves are depleted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to control inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Solely massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

Farage has so far committed few policies to paper aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension here between rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.