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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

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

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising forceful measures to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

Farage to date committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, 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, Argentina’s citizens have already paid significant costs.