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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has placed a limit on the currency to control triple-digit price increases and now it is overvalued and reserves are exhausted, leaving the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

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

These key characteristics are also seen in his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to bring inflation in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and multiple corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

Farage has so far committed few policies to paper aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, though, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

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