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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering US dollars along 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 country long used to saving in the greenback.

“The best time for purchasing is now,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the peso to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, promising forceful policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

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

Labour hopes this stance will allow it to depict the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict there between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.