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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the currency to tame soaring inflation and currently it remains artificially high and foreign reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to bring price rises under control. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement public demand in the face of elite opposition.

Farage to date committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita is often 10% lower in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.