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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to holding the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the election concludes. President Javier Milei has placed a limit on the currency to control soaring price increases and now it is overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will allow it to portray Farage as intending to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.