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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country accustomed to holding the greenback.

“The best time to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the Argentine peso once the voting is over. The president has imposed a cap on the currency to tame soaring inflation and currently it is overvalued and reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper aside from a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (although each charismatic individual promises something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be 10% lower in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.