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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation accustomed to holding the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has imposed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Only large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage has so far committed few policies in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research 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, gross domestic product per head tends to be 10% lower in countries run by populist leaders than in similar economies with more mainstream regimes.

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

Another intriguing finding of the research, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.