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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. The president has placed a cap on the currency to control triple-digit inflation and currently it is overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of proposing reckless spending, he lately dropped a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to portray Farage as planning to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

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 reduced rules, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

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

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

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

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.