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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

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

Similar to her, economists across the spectrum anticipate a devaluation of the national currency once the voting is over. The president has imposed a limit on the currency to control soaring inflation and currently it remains artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back control of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, 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 deep budget reductions – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact 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 seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of proposing reckless spending, he lately dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this stance will enable it to portray the populist as planning to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear 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 everyday financial matters.

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