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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has placed a limit on the peso to control triple-digit inflation and currently it is overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing muscular policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control inflation under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Only massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise to make large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear 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 everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.