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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide 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 election is over. President Javier Milei has imposed a cap on the currency to tame triple-digit inflation and currently it remains artificially high and reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim command of economic management from the establishment on behalf 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 beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring price rises under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to depict Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

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 significant costs.