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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are offering American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment to buy is now,” states one arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency after the voting is over. President Javier Milei has placed a limit on the currency to control soaring price increases and now it is overvalued and reserves are exhausted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to bring price rises under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Solely massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve 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 mass deportations, 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 toward traditional institutions being a key part of populist rhetoric.

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

Labour aims this position will allow it to depict Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes 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 rulers compared to comparable countries under conventional leadership.

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

A further interesting result from the study, though, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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