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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the currency to tame soaring price increases and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to portray Farage as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, 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 lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.