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“Dollars, dollars.” Under the scorching heat, scores of currency traders are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the currency to control triple-digit price increases and now it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

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

Milei is a textbook populist: captivating, iconoclastic, vowing forceful policies to reclaim command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to control inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months after a poor performance in local polls and a series of graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies to paper aside from a call for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will allow it to portray Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding of the research, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.