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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the national currency once the election concludes. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and now it remains overvalued and reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to bring price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and a series of graft allegations. Only massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about facing criticism for planning reckless spending, he recently abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.