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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election is over. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to bring inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and multiple graft allegations. Only large-scale financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to implement public demand despite elite opposition.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

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