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“Exchange, exchange.” Under the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the election is over. President Javier Milei has placed a limit on the peso to tame soaring inflation and now it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately after a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he recently abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray Farage as planning to bring back austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual promises something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective 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 plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.