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“Exchange, exchange.” Under the blazing sun, dozens of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation accustomed to saving in the greenback.

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

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the election concludes. President Javier Milei has placed a limit on the currency to control soaring price increases and now it remains artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim command of economic management from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Only massive financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly replacing its head, the incumbent, 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 recently dropped a promise for large tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray Farage as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (though of course every populist leader claims to offer something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.