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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation long used to holding the US dollar.

“The best time to buy is now,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the peso to tame triple-digit price increases and currently it is artificially high and foreign reserves are exhausted, leaving the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising muscular policies to reclaim command of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to bring inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a poor performance in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader to date outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to depict Farage as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies with more mainstream regimes.

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

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.