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“Dollars, dollars.” Beneath the blazing sun, dozens of currency traders are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little 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,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting concludes. The president has imposed a cap on the currency to tame soaring inflation and now it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from international lenders for contributing to bring inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple graft allegations. Only massive financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage has so far outlined limited plans in writing aside from a call for mass deportations, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even 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 unsettled: concerned about facing criticism for proposing reckless spending, he lately dropped a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when confronting practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

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