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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The best time to buy is currently,” states one arbolito, declining to give 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 voting concludes. President Javier Milei has placed a cap on the currency to tame soaring inflation and currently it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise 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 similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Solely massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita is often a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” contend the researchers.

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 shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

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