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“Cambio, cambio.” Under the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to holding the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the voting is over. President Javier Milei has placed a limit on the peso to control triple-digit price increases and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to control price rises in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: wary of being accused of planning reckless spending, he lately abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

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