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“Exchange, exchange.” Under the scorching heat, scores of currency traders are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has placed a cap on the peso to control triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular measures to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. This plan has something in common 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 financial markets began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and a series of graft allegations. Only massive economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of proposing reckless spending, he recently dropped a promise to make large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people have already paid significant costs.