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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the election concludes. President Javier Milei has imposed a cap on the peso to tame soaring price increases and now it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control price rises under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he recently abandoned a promise to make large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict Farage as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, over the long term, GDP per capita is often 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.