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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is currently,” 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 national currency once the election concludes. President Javier Milei has imposed a cap on the currency to control triple-digit inflation and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

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 left-leaning populist movements, such as the powerful Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner to the north, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately following a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies to paper aside from a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will allow it to portray Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

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

In other words, it is not clear whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But 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 significant costs.