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“Dollars, dollars.” Under the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency after the election concludes. President Javier Milei has imposed a cap on the currency to control triple-digit price increases and now it remains overvalued and reserves are exhausted, leaving the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control 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, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

Farage to date committed few policies in writing except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for planning reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for tax cuts and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the researchers.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, 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 “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.