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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the US dollar.

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

Like her, economists across the spectrum expect a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the peso to tame soaring inflation and currently it remains overvalued and reserves are exhausted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular measures to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: wary of being accused of proposing reckless spending, he recently dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.