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“Dollars, dollars.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency after the voting concludes. President Javier Milei has placed a cap on the peso to tame soaring price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular policies to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner 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 public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to bring price rises in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a shaky result in provincial elections and multiple graft allegations. Only large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to portray Farage as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations run by populist leaders compared to similar economies with more mainstream regimes.

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

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing significant costs.