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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down 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 election is over. President Javier Milei has placed a cap on the peso to tame soaring price increases and now it is overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to depict Farage as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

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

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.