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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and currently it remains overvalued and reserves are exhausted, causing the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to control inflation in check. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he lately dropped a promise to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to portray Farage as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back 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 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 that on average, after 15 years, GDP per capita tends to be a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.