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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is now,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the currency to control soaring inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often 10% lower in nations governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.