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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency after the election concludes. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it is overvalued and reserves are exhausted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing forceful measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control price rises in check. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

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

Farage to date committed few policies to paper aside from proposals for mass deportations, that he later 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 fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he recently abandoned a promise to make large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to depict Farage as planning to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in countries run by populist leaders than in comparable countries under conventional leadership.

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

Another intriguing finding of the research, however, is that despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.