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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

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

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

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and now the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular measures to wrestle back command of the economy from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of graft allegations. Only massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning reckless spending, he lately abandoned a pledge for large 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 depict Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.