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“Cambio, cambio.” Under the blazing sun, scores of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is currently,” says a 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 national currency once the voting is over. The president has placed a limit on the currency to tame triple-digit price increases and now it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular measures to reclaim control of the economy 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 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 budget reductions – had won plaudits from international lenders for helping to bring inflation in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and a series of graft allegations. Solely massive economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal analysed 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 compared to comparable countries under conventional leadership.

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

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.