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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the greenback.

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

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has placed a cap on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from the establishment on behalf of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to bring price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a poor performance in local polls and a series of graft allegations. Solely large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage to date committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.