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“Exchange, exchange.” Under the scorching heat, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to saving in the greenback.

“The best time to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a devaluation of the Argentine peso once the voting is over. President Javier Milei has imposed a cap on the currency to control triple-digit price increases and now it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to reclaim command of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict the populist as planning to reintroduce austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing significant costs.