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

“The optimal moment for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election is over. President Javier Milei has imposed a cap on the currency to control soaring inflation and now it is artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to wrestle back command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy 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 demanding lower taxes and reduced rules, but also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often a tenth less in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.