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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the currency to tame soaring inflation and currently it remains artificially high and reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

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

Milei epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of economic management from the establishment on behalf of the people.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to bring inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a shaky result in provincial elections and a series of graft allegations. Solely massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly 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 facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.