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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” says one arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency once the voting is over. The president has imposed a cap on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the powerful Peronism, and currently the president’s conservative populism.

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

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to bring inflation under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and multiple graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he recently dropped a promise to make large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says 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 talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises something unique).

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.