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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are hawking American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment for purchasing is now,” states a arbolito, refusing to provide 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 national currency after the voting concludes. The president has imposed a cap on the peso to tame triple-digit inflation and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from the IMF for helping to control price rises in check. 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.

But investors started to doubt in Milei’s radical project lately after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he recently dropped a promise to make significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as intending to bring back austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting 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. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” contend the paper’s authors.

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is sustained by external aid, the Argentine people have already paid a heavy price.