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“Exchange, exchange.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a country accustomed to holding the US dollar.

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

Like her, economists across the spectrum anticipate a depreciation of the national currency once the election concludes. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and currently it is artificially high and reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for helping to control price rises under control. This plan has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple corruption scandals. Solely massive economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to portray Farage as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita is often 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.