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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

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

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. President Javier Milei has placed a limit on the currency to control soaring inflation and now it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of the people.

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 privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to control price rises under control. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a promise for large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will allow it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence 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 analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

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

A further interesting result from the study, though, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.