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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a nation long used to saving in the US dollar.

“The best time to buy is currently,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. The president has imposed a cap on the peso to control soaring price increases and now it remains overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to reclaim control of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner 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 extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control price rises under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months after a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans in writing except for proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in 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 unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to depict the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.