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“Exchange, exchange.” Under the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The best time for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to reclaim control of the economy from traditional elites for the benefit of the people.

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

Until recent months, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he lately abandoned a pledge to make large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict Farage as planning to bring back fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with 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 that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

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