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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to tame soaring inflation and now it is overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to control price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.