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“Cambio, cambio.” Under the scorching heat, scores of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country accustomed to holding the US dollar.

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

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the currency to tame soaring price increases and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate 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 is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep budget reductions – had earned praise from international lenders for contributing to control inflation in check. This plan has something in common with the policies 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 the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Only massive economic support from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper aside from proposals 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 distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as intending to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.