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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the national currency once the voting is over. President Javier Milei has placed a cap on the currency to control triple-digit price increases and now it is artificially high and foreign reserves are exhausted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful policies to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control 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 dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Only massive economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand despite elite opposition.

Farage to date committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about being accused of proposing reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

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

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.