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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively 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 holding the US dollar.

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

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and currently it is overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing muscular policies to wrestle back control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to control price rises in check. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage to date outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

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

The opposition hopes this position will allow it to depict Farage as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita tends to be a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, 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 appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.