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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the voting is over. The president has imposed a limit on the currency to tame soaring inflation and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s conservative populism.

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

These key characteristics are shared by his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving 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 the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Only massive economic support by the US has prevented what looked set to become 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 about economic detail with a bullish determination to enact public demand despite elite opposition.

Farage has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray the populist as intending to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.