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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country long used to saving in the greenback.

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

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a limit on the currency to control soaring price increases and currently it is artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately after a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to portray Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.