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

“The best time to buy is now,” says one arbolito, declining to give her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso after the election concludes. The president has placed a limit on the currency to tame triple-digit price increases and now it remains artificially high and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to reclaim control of economic management from the establishment on behalf of the people.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control price rises in check. The programme shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

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

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

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