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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to saving in the greenback.

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

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency once the voting is over. The president has placed a limit on the currency to control triple-digit price increases and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing forceful measures to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for planning reckless spending, he recently dropped a pledge for large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict Farage as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often 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 usually go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.