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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the peso to control soaring price increases and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster 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 provincial elections and multiple graft allegations. Only massive economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a promise to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy 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 deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.