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“Dollars, dollars.” Under the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The best time to buy is now,” states one 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 Argentine peso after the voting is over. President Javier Milei has imposed a limit on the peso to tame soaring inflation and now it is artificially high and reserves are depleted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and a series of corruption scandals. Only massive economic support from abroad has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly 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 planning reckless spending, he lately dropped a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people calling for lower taxes and reduced rules, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes 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 nations run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.