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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation accustomed to holding the greenback.

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

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has placed a limit on the peso to control soaring inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to bring price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita tends to be a tenth less in nations run by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

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