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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the US dollar.

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

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the voting is over. The president has imposed a limit on the currency to control soaring price increases and currently it is artificially high and foreign reserves are depleted, leaving the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, promising muscular measures to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

Farage to date committed few policies in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a pledge for large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this position will enable it to portray Farage as planning to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform 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 says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

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

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.