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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation long used to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting concludes. The president has imposed a cap on the peso to control triple-digit inflation and currently it remains overvalued and reserves are depleted, causing the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in local polls and multiple graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing government spending.

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 emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.