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“Exchange, exchange.” Under the scorching heat, scores of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a depreciation of the national currency once the voting is over. The president has imposed a cap on the currency to control soaring price increases and now it remains overvalued and reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to portray Farage as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual promises something unique).

Recent research 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 tends to be 10% lower in nations run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.