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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country long used to saving in the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the peso to control triple-digit price increases and now it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back control 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 beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

Farage to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

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

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

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

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.