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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election concludes. President Javier Milei has placed a limit on the currency to control triple-digit price increases and currently it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

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

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from international lenders for helping to bring price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately following a shaky result in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning reckless spending, he recently abandoned a pledge to make large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to portray Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, 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 appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.