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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country long used to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has placed a cap on the peso to tame triple-digit inflation and now it is artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to wrestle back control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring price rises under control. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise for significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, GDP per capita 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 erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

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