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“Exchange, exchange.” Under the blazing sun, scores of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation long used to saving in the greenback.

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

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. The president has imposed a limit on the currency to control triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often 10% lower in countries run by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when 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 back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.