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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to reclaim control of economic management from traditional elites for the benefit 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 people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control price rises under control. This plan shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Only large-scale economic support from abroad has prevented 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, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

Farage has so far committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict Farage as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled 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 seeking Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

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