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“Dollars, dollars.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is currently,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the peso to tame soaring inflation and currently it is overvalued and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring inflation in check. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Only massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, swept away doubts about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing reckless spending, he lately dropped a promise for significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to depict the populist as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline of industrial jobs,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when faced with real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers compared to similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.