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“Exchange, exchange.” Under the blazing sun, scores of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and currently it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising forceful policies to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to bring price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of planning reckless spending, he recently dropped a promise for significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to depict the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

A further interesting result of the research, 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 shorter tenures 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.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.