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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

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

These key characteristics are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Only massive financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge for significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” 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, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people are already bearing significant costs.