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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the peso to control soaring inflation and now it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to reclaim control of economic management from the establishment on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from the IMF for helping to bring price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a major currency crisis.

Contradictions

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

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he recently abandoned a promise for significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray Farage as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

Jo Michell says there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

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

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 a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.