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“Dollars, dollars.” Under the scorching heat, scores of money changers are selling US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a nation long used to saving in the US dollar.

“The optimal moment for purchasing is now,” says a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a depreciation of the national currency after the voting is over. President Javier Milei has placed a limit on the currency to control soaring inflation and currently it remains artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for helping to control inflation under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Only massive economic support from abroad has averted what looked set to become a full-blown currency crisis.

Inconsistencies

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 implement public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals for mass deportations, which he subsequently seemed to adjust spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists often perform poorly when faced with practical difficulties (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be a tenth less in countries run by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.