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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country long used to saving in the US dollar.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the voting is over. The president has placed a limit on the currency to control triple-digit price increases and currently it remains artificially high and reserves are exhausted, leaving the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been susceptible 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, vowing forceful policies to reclaim command of the economy from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring inflation under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a promise for significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict the populist as planning to bring back austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (though of course every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.