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“Dollars, dollars.” Under the scorching heat, dozens of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the peso to control triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. This plan has something in common with that 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 Milei’s radical project lately following a shaky result in local polls and multiple graft allegations. Only large-scale financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell says 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 complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.