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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the greenback.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the voting concludes. President Javier Milei has placed a cap on the currency to tame soaring price increases and currently it is overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises under control. 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 defeated, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

Farage to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.