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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the election concludes. The president has placed a cap on the currency to control soaring inflation and currently it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim control of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control price rises under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months following a shaky result in local polls and multiple graft allegations. Solely large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he lately dropped a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this position will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

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

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.