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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the Argentine peso after the voting concludes. President Javier Milei has imposed a cap on the currency to control soaring price increases and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign 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 now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to control inflation in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and a series of graft allegations. Solely massive economic support by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage to date committed few policies to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about being accused of planning reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader promises something unique).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.