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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country long used to holding the greenback.

“The best time for purchasing is now,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame triple-digit price increases and currently it is overvalued and foreign reserves are depleted, causing the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Only large-scale economic support by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader to date committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will allow it to portray Farage as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict there among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

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

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in nations governed by populist rulers than in comparable countries 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.

A further interesting result of the research, though, is even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, Argentina’s citizens have already paid significant costs.