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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are selling American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The best time to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has placed a cap on the peso to tame triple-digit inflation and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising muscular policies to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and a series of corruption scandals. Solely massive economic support from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement public demand despite elite opposition.

Farage to date outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

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

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing significant costs.