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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small 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 for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful policies to reclaim command of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by 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 – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control price rises in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Solely massive economic support from abroad has prevented what looked set to become 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 implement public demand despite elite opposition.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he recently abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people have already paid a heavy price.