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“Exchange, exchange.” Beneath the scorching heat, scores of currency traders are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the national currency once the election concludes. The president has placed a cap on the currency to control triple-digit price increases and now it is overvalued and foreign reserves are depleted, causing 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 debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to control inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Only large-scale economic support by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to portray Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell says there are contradictions in Farage’s economic programme, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking 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 faced with practical difficulties (although each charismatic individual promises something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, GDP per capita is often a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.