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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the election concludes. The president has imposed a cap on the peso to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim control of economic management 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 styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to control inflation under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months after a poor performance in local polls and a series of graft allegations. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge for large tax cuts. 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 depict Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when faced with real-world challenges (although every populist leader promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

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

A further interesting result of the research, though, is that despite their economic costs, these leaders 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 policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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