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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the peso to control triple-digit price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers 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 paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.