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“Dollars, dollars.” Under the blazing sun, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the currency to control triple-digit price increases and currently it is overvalued and reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being 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 the IMF for contributing to bring inflation in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.