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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the election concludes. The president has imposed a limit on the peso to control triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. The programme 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 in recent months after a poor performance in local polls and multiple graft allegations. Solely massive financial intervention by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage to date committed few policies in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he lately dropped a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will allow it to depict Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.