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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a depreciation of the national currency after the voting is over. President Javier Milei has placed a cap on the currency to control soaring inflation and now it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country 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 influential Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful policies to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to bring price rises under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

Farage to date committed few policies to paper aside from a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of planning reckless spending, he recently abandoned a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

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

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.