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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” states a arbolito, declining to give her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum expect a devaluation of the Argentine peso once the election is over. President Javier Milei has imposed a limit on the currency to control soaring price increases and currently it is overvalued and reserves are exhausted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, unconventional, promising forceful measures to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to control inflation under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of graft allegations. Solely massive financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, perhaps even replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a promise to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

A further interesting result of the research, though, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.