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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to holding the greenback.

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

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency once the election concludes. President Javier Milei has placed a cap on the peso to tame soaring inflation and now it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are shared by his political partner to the north, and by the UK politician, 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 extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand in the face of elite opposition.

Farage has so far committed few policies in writing except for proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to portray the populist as planning to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe 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, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.