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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to saving in the US dollar.

“The best time to buy is now,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to tame triple-digit price increases and currently it is overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda lately after a shaky result in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans in writing except for proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises something unique).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist rulers compared to comparable countries under conventional leadership.

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

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.