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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country long used to saving in the US dollar.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the peso to tame soaring inflation and now it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising forceful measures to reclaim control of the economy from traditional elites for the benefit of the people.

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

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring price rises under control. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and multiple graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage to date committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

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

Labour hopes this position will allow it to portray the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded 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 explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at retaining office, 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 in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to 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.