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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the greenback.

“The best time for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the currency to control soaring inflation and currently it remains overvalued and foreign reserves are depleted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray the populist as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this story of restoring British jobs 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 claims to offer something unique).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in countries run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.