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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful measures to reclaim control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to control price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Only large-scale financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago 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 in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of proposing reckless spending, he recently dropped a pledge for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to 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.