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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the election is over. The president has placed a limit on the peso to tame triple-digit inflation and now it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising forceful measures to wrestle back command of economic management from the establishment on behalf of the people.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a beer-drinking 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 deep public spending cuts – had won plaudits from the IMF for contributing to bring price rises in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and multiple graft allegations. Only massive economic support from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises something unique).

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

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.