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“Dollars, dollars.” Under the scorching heat, dozens of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to holding the greenback.

“The optimal moment for purchasing is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency after the voting is over. The president has placed a limit on the currency to control soaring inflation and currently it is artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back control of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control inflation in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper aside from a call for large-scale removals, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he lately abandoned a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to portray the populist as intending to bring back austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita is often a tenth less in nations run by populist leaders than in comparable countries under conventional leadership.

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

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.