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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso once the election concludes. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it remains artificially high and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim command of economic management 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 presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita is often a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.