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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are hawking US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the election is over. The president has placed a limit on the peso to tame triple-digit price increases and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are shared by his political partner to the north, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for contributing to control inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

Farage has so far outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning reckless spending, he recently abandoned a promise for large tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell notes there are contradictions in Farage’s economic programme, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review examined 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 governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, versus four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, 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 through foreign assistance, the Argentine people are already bearing a heavy price.