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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation accustomed to saving in the US dollar.

“The best time to buy is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the election is over. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally to the north, and by Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact public demand 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 on the hoof. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.