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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time for purchasing is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to tame soaring price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to control inflation in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension here between rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.