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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency after the election concludes. President Javier Milei has imposed a limit on the currency to control triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim control of the economy from the establishment on behalf of the people.

These key characteristics are shared by his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for contributing to bring inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately after a shaky result in local polls and multiple corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise for large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer something unique).

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 is often 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

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

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid a heavy price.