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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the greenback.

“The optimal moment to buy is currently,” states one arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the national currency once the voting is over. The president has placed a limit on the peso to tame soaring inflation and currently it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrestle back command of the economy from the establishment on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely large-scale economic support by the US has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there among rich backers seeking radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined 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 countries run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.