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“Dollars, dollars.” Under the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the voting is over. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by debt defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

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

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and multiple graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.