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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to control soaring price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to control inflation in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of graft allegations. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a pledge for large tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.