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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the peso to tame triple-digit price increases and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his ally to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But investors 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 massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to portray Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.