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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to saving in the greenback.

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

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the currency to control soaring price increases and now it remains artificially high and reserves are depleted, causing the national economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring inflation in check. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of proposing reckless spending, he recently dropped a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

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

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” 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, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.