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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The best time to buy is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the election is over. President Javier Milei has imposed a cap on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing forceful measures to wrestle back control of the economy from traditional elites 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 styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. 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 the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise to make large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.