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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are selling American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the national currency after the voting concludes. The president has imposed a limit on the peso to control soaring price increases and currently it is overvalued and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular policies to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of planning reckless spending, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.