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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the voting concludes. The president has imposed a cap on the currency to control triple-digit inflation and now it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to bring price rises under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he recently dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined 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 tends to be 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“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, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.