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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” states a arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency after the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronism, and now the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back command of economic management from the establishment on behalf of the people.

These key characteristics are shared by his ally to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and a series of corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning reckless spending, he recently dropped a promise to make large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to depict Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.