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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are hawking American currency on 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 country long used to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a limit on the currency to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular policies to wrestle back control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with confident resolve to implement public demand despite 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 on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour hopes this position will allow it to depict Farage as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “The party is funded by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader promises something unique).

A recent paper from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

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

Put simply, it is not clear that even when their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.