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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency once the election is over. 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, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim control of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his ally 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 public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to control price rises in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a poor performance in local polls and multiple graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

Farage to date committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this position will enable it to depict the populist as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, though, is that 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 mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.