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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling US dollars on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the 26 October congressional elections in a nation long used to saving in the US dollar.

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

Like her, economists from all backgrounds expect a depreciation of the national currency once the election concludes. The president has placed a limit on the peso to tame triple-digit price increases and currently it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising muscular policies to wrestle back command of economic management from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of graft allegations. Only large-scale financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist leaders compared to similar economies with more mainstream regimes.

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

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.