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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The best time to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso once the voting is over. The president has imposed a cap on the currency to tame soaring inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

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

Farage has so far committed few policies to paper except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a pledge for significant tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict the populist as planning to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.