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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the election is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately following a shaky result in provincial elections and multiple graft allegations. Solely massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he recently abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as intending to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

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