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“Dollars, dollars.” Beneath the blazing sun, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street 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 saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso once the election concludes. The president has placed a cap on the currency to tame triple-digit inflation and now it remains artificially high and reserves are exhausted, leaving the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular measures to reclaim command of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to control price rises under control. The programme shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, the incumbent, 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 promise for large tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as intending to bring back austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

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