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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the national currency once the voting is over. The president has imposed a cap on the peso to control triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring price rises in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

Farage to date committed few policies in writing aside from proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid significant costs.