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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation accustomed to holding the greenback.

“The optimal moment to buy is currently,” states one arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the national currency after the election is over. President Javier Milei has imposed a limit on the peso to control triple-digit inflation and now it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to control inflation in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

However investors started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this stance will allow it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual 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 that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

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

Another intriguing finding of the research, though, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.