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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming 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’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum expect a depreciation of the national currency after the voting is over. President Javier Milei has placed a limit on the currency to control soaring price increases and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to reclaim command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from the IMF for helping to control inflation under control. The programme has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a shaky result in local polls and a series of corruption scandals. Solely massive economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by affluent backers calling for lower taxes and deregulation, but also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita is often 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

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