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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to saving in the greenback.

“The best time to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting is over. The president has placed a limit on the peso to control soaring inflation and now it remains overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign 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 currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring price rises in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only massive economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

Farage has so far outlined limited plans in writing except for a call for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in countries governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.