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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the election is over. The president has imposed a cap on the peso to tame soaring price increases and now it is artificially high and reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has frequently been hit by debt defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim command of the economy from the establishment for the benefit of the people.

These defining traits are shared by his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to bring price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and multiple graft allegations. Solely massive economic support by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for proposing reckless spending, he recently dropped a pledge to make significant tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict the populist as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell 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 loss in manufacturing employment,” he explains. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

In truth, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations run by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is despite their economic costs, populist figures tend to be good at holding on to power, lasting on average 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 in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.