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“Exchange, exchange.” Under the scorching heat, dozens of money changers are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate 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 artificially high and reserves are depleted, leaving the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. This plan has something in common with the policies of his political hero Margaret Thatcher, 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 in recent months after a poor performance in local polls and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact public demand in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from a call for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for planning reckless spending, he recently abandoned a pledge for large tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to depict the populist as planning to bring back austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for lower taxes and deregulation, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.