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“Dollars, dollars.” Beneath the scorching heat, scores of money changers are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to tame soaring price increases and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now Milei’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing muscular policies to reclaim command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, 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 in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in the government’s agenda lately following a poor performance in local polls and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to depict the populist as intending to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict there among rich backers who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

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

Recent research from a leading journal analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid significant costs.