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

“The optimal moment for purchasing is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency once the voting is over. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it remains overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to bring price rises in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Only large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

Farage has so far outlined limited plans in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as planning to bring back fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in nations run by populist rulers compared to comparable countries 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 from the study, though, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

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