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“Dollars, dollars.” Under the blazing sun, scores of money changers are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting is over. The president has placed a limit on the currency to tame triple-digit inflation and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his political partner to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to portray Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing a heavy price.