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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a devaluation of the national currency once the election concludes. President Javier Milei has placed a limit on the peso to control triple-digit inflation and currently it is overvalued and reserves are depleted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate 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 epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a shaky result in local polls and multiple graft allegations. Solely large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from a call for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to portray the populist as intending to reintroduce fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.