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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a depreciation of the national currency after the election concludes. President Javier Milei has placed a cap on the currency to control soaring price increases and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

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

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise to make large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper 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, over the long term, gross domestic product per head is often a tenth less in countries run by populist rulers compared to similar economies under conventional leadership.

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

A further interesting result from the study, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.