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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it is artificially high and foreign reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing forceful policies to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his political partner to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.