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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering 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 accustomed to holding the greenback.

“The best time to buy is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the election is over. President Javier Milei has imposed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in provincial elections and multiple 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 arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he recently dropped a pledge to make large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to portray the populist as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes 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 governed by populist leaders than in comparable countries under conventional leadership.

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

Another intriguing finding from the study, however, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.