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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the greenback.

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

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and now it is overvalued and reserves are exhausted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he recently abandoned a promise for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to depict the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves 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 is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between rich backers seeking radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

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