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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency after the election is over. President Javier Milei has imposed a cap on the currency to control triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular measures to wrestle back control 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 Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation in check. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Solely large-scale financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he recently dropped a promise to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this position will allow it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to 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.