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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has placed a limit on the peso to tame triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim command of economic management from traditional elites on behalf of the people.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to control price rises in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a promise for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.