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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to holding the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency after the election is over. President Javier Milei has placed a limit on the currency to control triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Fertile Ground

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

Milei is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

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 control inflation in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, GDP per capita is often 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.