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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the greenback.

“The optimal moment to buy is now,” says one arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the election is over. President Javier Milei has placed a cap on the peso to tame soaring inflation and now it remains overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion 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 won plaudits from international lenders for helping to bring inflation under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

Farage has so far committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a promise for significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this position will allow it to depict Farage as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined 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 governed by populist rulers compared to similar economies with more mainstream regimes.

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

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing significant costs.