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“Dollars, dollars.” Under the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the voting concludes. The president has imposed a cap on the currency to tame triple-digit inflation and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising muscular policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

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

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for helping to control inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: concerned about being accused of proposing reckless spending, he recently dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.