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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country accustomed to holding the US dollar.

“The best time for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency after the voting is over. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple corruption scandals. Only large-scale economic support from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to portray the populist as planning to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But 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.