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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The best time to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. The president has placed a cap on the currency to control triple-digit inflation and currently it remains artificially high and reserves are depleted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to control price rises in check. This plan has something in common with that of his political hero the former UK prime minister, 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 poor performance in provincial elections and multiple graft allegations. Solely massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from proposals for large-scale removals, that he later seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray the populist as intending to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.