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“Exchange, exchange.” Under the scorching heat, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to saving in the US dollar.

“The best time for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has placed a cap on the currency to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for contributing 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 rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist leaders than in similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

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 are already bearing a heavy price.