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“Exchange, exchange.” Under the scorching heat, scores of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The best time to buy is now,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to control soaring price increases and currently it is overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to bring inflation under control. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely massive economic support by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be 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 focus instead on public spending cuts.

Labour hopes this stance will allow it to depict Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension here among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita is often 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.