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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economists from all backgrounds expect a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, vowing muscular measures to reclaim control of economic management from traditional elites for the benefit 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 beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge to make significant tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray the populist as intending to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, 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 countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.