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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has imposed a limit on the peso to control triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control inflation under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

Farage to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here among rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.