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“Exchange, exchange.” Under the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling 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 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 is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency once the election concludes. The president has imposed a cap on the currency to tame triple-digit inflation and now it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to wrestle back command of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and multiple 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 several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he lately dropped a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.