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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the national currency after the election is over. The president has imposed a limit on the currency to tame soaring inflation and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful measures to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to control price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and multiple corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he recently abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with 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 tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.