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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the peso to control soaring inflation and now it is overvalued and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to control price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and multiple corruption scandals. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element 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 promise for large tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray Farage as intending to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

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

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But back in Buenos Aires, regardless of if the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.