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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to saving in the greenback.

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

Similar to her, economic experts across the spectrum expect a devaluation of the national currency once the voting concludes. The president has imposed a cap on the currency to tame soaring price increases and currently it is overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim command of the economy from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control price rises in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and multiple graft allegations. Only large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage has so far committed few policies in writing aside from 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, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for planning reckless spending, he recently abandoned a pledge to make large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.