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“Exchange, exchange.” Under the blazing sun, dozens of money changers are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the national currency after the election concludes. President Javier Milei has placed a cap on the currency to control triple-digit inflation and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb 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 tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he recently abandoned a promise for large tax cuts. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance 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 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.