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“Dollars, dollars.” Under the scorching heat, dozens of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation long used to holding the greenback.

“The best time to buy is currently,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso after the voting is over. President Javier Milei has placed a cap on the currency to control triple-digit inflation and now it is overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back command of economic management from the establishment on behalf of the people.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, 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 financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

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 in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts 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 rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader promises something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing significant costs.