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“Exchange, exchange.” Under the blazing sun, scores of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the voting concludes. President Javier Milei has placed a limit on the currency to tame soaring price increases and now it is overvalued and reserves are exhausted, leaving the national economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to bring inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

Farage to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for large tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.