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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

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

Like her, economic experts across the spectrum anticipate a depreciation of the national currency after the election concludes. The president has imposed a limit on the peso to control soaring price increases and now it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular policies to reclaim control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control price rises under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in local polls and a series of corruption scandals. Solely large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

Farage has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.