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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the election is over. The president has imposed a cap on the peso to control triple-digit inflation and currently it is overvalued and reserves are depleted, leaving the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, such as the influential Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and a series of corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for planning reckless spending, he lately dropped a pledge to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict there between rich backers who want Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

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