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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a limit on the peso to control triple-digit inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim command of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. This plan 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 defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and multiple graft allegations. Solely massive economic support from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will enable it to portray Farage as intending to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in countries run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.