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“Exchange, exchange.” Under the blazing sun, dozens of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso once the election is over. President Javier Milei has placed a cap on the currency to control soaring inflation and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people calling for lower taxes and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.