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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the national currency once the election is over. The president has imposed a limit on the currency to tame triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

Farage has so far committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning reckless spending, he lately dropped a pledge to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.