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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little 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 election is over. President Javier Milei has imposed a limit on the currency to control soaring price increases and now it is artificially high and reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, promising forceful measures to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive financial intervention from abroad has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.