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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the voting concludes. The president has imposed a cap on the currency to control soaring price increases and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring price rises in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this stance will allow it to portray Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

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