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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the election is over. The president has placed a cap on the currency to control triple-digit price increases and now it remains artificially high and reserves are exhausted, leaving the national economy stagnant as buyers 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 economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months after a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: concerned about being accused of planning reckless spending, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict there among rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.