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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers opt for cheap imports.

Ideal Conditions

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

The president epitomizes populist leadership: charismatic, unconventional, vowing forceful measures to reclaim command of the economy from the establishment on behalf of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from international lenders for helping to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

However investors began losing confidence in the government’s agenda lately after a poor performance in provincial elections and a series of corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem unsettled: wary of being accused of planning reckless spending, he lately abandoned a pledge for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.