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“Exchange, exchange.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known 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 for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency after the election is over. President Javier Milei has imposed a cap on the peso to control soaring inflation and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful measures to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his ally in the United States, and by the UK politician, who styles 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 widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to bring inflation under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning reckless spending, he lately abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence 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 analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often a tenth less in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

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