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“Dollars, dollars.” Beneath the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. The president has placed a limit on the peso to control triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation under control. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months following a shaky result in local polls and multiple corruption scandals. Solely large-scale financial intervention by the US has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for a call for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise to make significant tax cuts. His second-in-command, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to depict the populist as planning to bring back austerity – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be a tenth less in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

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