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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly 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 voting concludes. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and now it is artificially high and reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to control price rises in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning reckless spending, he recently dropped a promise for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.